HR in recession times

T. Vijayabaskar- Management Department Eastern University, Sri Lanka

The financial crisis turned into the recession. For more than two decades we enjoyed almost constant economic growth and the knowledge of the initiatives for the recession almost disappeared.

Human Resources have to quickly react in recession and HR has to bring several initiatives to save the organization from bankruptcy.

HR added costs to the organization for many years and it has to show the potential to make huge cost cuts to adapt the organization and employees to the changed conditions on the market.

Human Resources in Recession has to work with the managers to allow them to fulfill their managerial duties with no additional costs and quickly. HR in Recession has to be quick and it has to be a trustful partner.

Affect of recession on human resources

The recession has affects many HR processes and they need top adopt to the new situation and they have to be ready for the new reality.

The impact of the recession is not the same and many HR Processes can continue their regular operation without any adjustment.

The recruitment process is the first HR process to be affected by the recession. The recruitment freeze is usually the first top management decision, when the sales numbers go down.

As the top management wants to keep the cash-flow under control, the recruitment freeze is the first logical decision.

Recruitment after the recruitment freeze is more selective and the company has to clearly decide about its priorities as the organization does not carry additional people on its payroll. The top management decides about the new strategy and the management is allowed to hire just the missing skills and competencies.

The training and development is the second HR Process to be affected by the recession. The management decides about the cuts in the investments and Human Resources has to find a way, how to keep the knowledge in the organization.

The company can survive without training and development for a limited period of time. The cost savings can be huge and the organization feels no impact of the lower training budget.

But the period has to be really limited as the organization does not lose the talents and the internal know how.

The compensation and benefits is the HR Process, which is heavily affected by the recession. The bonuses are not paid and the base salaries are under a huge pressure.

The compensation and benefits specialists are under the pressure as they have to identify the areas in the organization to realize the redundancies.

The recession is a good opportunity for Human Resources to introduce the changes to the organization. But the reaction of HR has to be quick as the internal opposition has no chance to form their forces.

Compensation strategy in recession

The compensation strategy can be under a huge pressure in the recession. The top management sees a great opportunity to realize significant cost savings resulting from lower base salaries offered to the new employees.

The compensation strategy should not be that flexible as it can breach the internal equity and the external equity can quickly change too.

The internal equity is always a good goal for compensation and benefits and it is a real long term goal. The recession should not break such a goal and the organization has to identify other areas for cost cutting, not the compensation strategy and the compensation policy.

The compensation strategy is very expensive and the quick change in the middle of the implementation can cost huge money.

The organization can realize short term cost savings, but the cost in the future is enormous. The HR invests money into bringing the internal equity and the simple solution can break the whole effort.

The compensation strategy cannot be changed easily and the recession is not a good decision moment. The recession can show, if the compensation strategy works, it is not a good moment to cancel the current compensation policy.

Human resources after recession

The current recession will push Human Resources to become even more business oriented than before. The age of the general and widespread prosperity is over and the competition among organizations and even nations will become tougher than ever.

The recession will make many people unemployed, but on the other hand the organization will be pushed even more to find the best talents and to grow the new leaders inside their own organization, cheaply. The recession will push the change in human resources. The HR will not be the department playing the role of the social security department, but it will become a strong performance efficiency player in the organization.

1. The employees in HR will have to change themselves as they can provide the value added to the leaders of the organization: Financial Analysis will become a necessity in Human Resources. Each initiative of the business will have to be properly evaluated in HR and the HR Professionals will have to issue their own statement on the return of investment.

2. The HR Professionals will have to find the opportunities to make the business more profitable every day. The HR Managers will have to gain the power to show the areas for the improvement at their internal clients. This will be painful, but it will become the necessity.

3. The HR Employees will have to rotate through the business function to become real experts in the business daily practice. Without the knowledge of the products, the sales and operations processes, the HR Employees will not be useful for the leaders as no trust to their solutions will be built.

The recession is one of the biggest opportunities for Human Resources ever. As the organizations will be smaller and more efficient in future, the HR Professionals can act as the real change agents in organizations promoting new approaches in the area of the people management. The important roles and responsibilities that HRM should focus on during a recession:

l Conduct organizational assessment or audit

This means streamlining the organization by laying-off employees. Usually, the non-permanent jobs or positions are the first to go. On an organizational competitiveness perspective, reduction of personnel is not necessarily the best or first option in cutting costs.

Looking closely into the details of each business processes through an organizational assessment or audit will reveal that there are other areas where cost cutting measures can be made.

The HRM should be the forefront in this activity being independent from operations. Besides, it has the competency to do such an audit.

lInformation dissemination

Keeping employees informed on a timely basis is probably the most important role that HRM can play.

Employees need to know where the business is going and what the intentions of top management are. In a recession what is more at stake are the investments made and employees come second.

However, when job security is threatened due to a financial crisis, employees deserve to be informed about the status of the business and their employment's fate.

With many already unemployed (some are regretfully unemployable), and the job opportunities narrowing or disappearing, employees must be informed ahead and warned of the possibilities of losing their jobs so that they can prepare emotionally and financially.

Keeping communication channels open put the HRM at a very crucial role of bridging the gap that may widen when the inevitable retrenchment of employees have been decided, and which may tend to put management in a bad light, especially in unionized companies.

l Providing or coordinating livelihood skills training

Employees need to look beyond the comforts of their salaries and job securities.

They also need to develop other skills that will help then earned a decent living other than their current employment.

The HRM should have integrated in its yearly training curricula training on livelihood skill development.

With these new skills, employees are better prepared to cope in cases of unemployment and may consider home or small businesses as income alternatives; besides, many small home businesses do not require huge investments.

l Counselling and guidance

A financial crisis that is global in nature has a psychological effect on the average employee. Especially when the news of bigger and more established companies are laying-off employees and/or are closing shop, they are likely wary also of their own job security.

HRM should provide guidance on how employees can cope in case of the inevitable happen. It should help affected employees to find possible alternatives in cases of mass lay-offs.

The recession can be over, but the new reality comes to the world of the business and Human Resources.

The recession changed the behaviour of the top management and it pushed Human Resources to offer new solutions.

After many years of constant growth, the HR had to deliver the initiatives to cut costs and to increase the performance of the staff.

The recession created new reality and the HR has to adjust its policies and procedures to become successful.

The new reality is about an extreme cost control and it is about an extreme competition for the resources.

The new reality is about small and smart organization, who can handle big things.

The times of the new multinational companies is almost finished, the organization will be flat, smaller and the time to react will be extremely quick.

The margins will be low and HR will have to support the speed and efficiency even more.

The HR will have to develop new procedures for the new slim organization and the HR Department will have to slimmer as well.

The HR Managers will have to design new efficient HR Processes as the managers can quickly decide and they can manage the resources of the organization.

The new reality will press HR to compete for the best HR practice and the policies will be more specialized in each organization. The people in HR will find their job more attractive as they will have a huge impact on the overall costs of the organization.